He says that the government taking control of the banks isn't socialism. Instead it is a fundamental aspect of capitalism that when equity holders can't repay creditors, the creditors become the owners of the company. Due to the unusual structure of banks, the government becomes the owner. Even though the government ends up owning the bank it is not socialism because of the mechanism through which that occurred.
"Only with law, and courts, and government power to enforce property rights and contracts, can private enterprise work. Without that, capitalism cannot amount to much--a system of economic organization controlled only by trust and private forces will not thrive."
totally unjustified. the writer is counting on the reader agreeing with this without close examination.
What if the phrase "government power" were left out? I think that 'enforcement' is the key concept here, rather than an assumption that it has to be a government doing the enforcing.
An interesting claim I haven't seen before: nationalization of failing banks does not constitute socialism. Rather, it's the legal--and responsible--outcome under normal bankruptcy law.
I agree with what he said about bankruptcy, but then he said banks should not go through that process, they should just be owned and run by the government, and he defended that position with nothing more than the standard "too big to fail" and calling it capitalism. Bankruptcy is a well-understood procedure, not calls to put random people in charge, even after admitting the government doesn't have anyone experienced to put in charge. Legislating this solution won't make it successful, which is why socialism and fascism don't work.
Without arguing whether the government should have become a creditor to all banks (which I would disagree with), I understand his claim to be: the system fails if creditors do not take action to recoup their investments in failing institutions--and in this case the major creditor is the government.
He's distorting the truth, though. What he says happened: we helped prop up banks when they needed it most. What actually happened: we gave banks money to prop them up, and they used to do things like buy out their competitors and give upper management new rounds of large bonuses.
'Bankruptcy could become, in effect, a massive bank recapitalization. Essentially, the equity holders are told, "Go away, you have been zeroed out." The debt holders are told, "Congratulations, you are the new equity holders." Suddenly, these financial organizations have a lot more equity capital and not a shred of debt! And all done without a penny of taxpayer money!'
Not all socialism entails government ownership there is also direct collective ownership. To answer OA's question there are many successful countries with socialist aspects to their economies (esp compared to US's extreme capitalism) Europe, esp Scandinavia, China, India. The countries that mix ideologies seem to have it the best.
This whole article sounds like a shell game just to avoid associating the bail-out with the word "socialist" which has a ridiculously despised reputation amongst Old White Rich Guys in USA.
And re "Why we're Not Socialists". Um, don't know what we you're talking about. I am a socialist.
[+] [-] natmaster|17 years ago|reply
Here is a summary:
-I like the bailouts
-Socialism is bad
-Capitalism is good
No where does he say anything about why anything is not socialism, let alone 'us'.
[+] [-] mhb|17 years ago|reply
He says that the government taking control of the banks isn't socialism. Instead it is a fundamental aspect of capitalism that when equity holders can't repay creditors, the creditors become the owners of the company. Due to the unusual structure of banks, the government becomes the owner. Even though the government ends up owning the bank it is not socialism because of the mechanism through which that occurred.
[+] [-] gabrielroth|17 years ago|reply
[+] [-] nazgulnarsil|17 years ago|reply
totally unjustified. the writer is counting on the reader agreeing with this without close examination.
[+] [-] gabrielroth|17 years ago|reply
[+] [-] mjtokelly|17 years ago|reply
[+] [-] likpok|17 years ago|reply
If you have to invest in security to make sure people don't steal your things, you are not investing in your business, which will retard growth.
[+] [-] mjtokelly|17 years ago|reply
[+] [-] mike_organon|17 years ago|reply
[+] [-] mjtokelly|17 years ago|reply
Without arguing whether the government should have become a creditor to all banks (which I would disagree with), I understand his claim to be: the system fails if creditors do not take action to recoup their investments in failing institutions--and in this case the major creditor is the government.
[+] [-] anamax|17 years ago|reply
What is the "legal and responsible outcome under normal bankruptcy law"? Nationalization of banks surely isn't and neither is socialism.
[+] [-] colins_pride|17 years ago|reply
[+] [-] kubrick|17 years ago|reply
[+] [-] mjtokelly|17 years ago|reply
More discussion on the same theme.
'Bankruptcy could become, in effect, a massive bank recapitalization. Essentially, the equity holders are told, "Go away, you have been zeroed out." The debt holders are told, "Congratulations, you are the new equity holders." Suddenly, these financial organizations have a lot more equity capital and not a shred of debt! And all done without a penny of taxpayer money!'
That last sentence is a bit over-optimistic...
[+] [-] njharman|17 years ago|reply
This whole article sounds like a shell game just to avoid associating the bail-out with the word "socialist" which has a ridiculously despised reputation amongst Old White Rich Guys in USA.
And re "Why we're Not Socialists". Um, don't know what we you're talking about. I am a socialist.
[+] [-] joubert|17 years ago|reply
[+] [-] robak|17 years ago|reply
[deleted]